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The Solar Bears Are Wrong

Now SolarCity has created bonds to finance residential solar energy installations. It sold $50 million this year, and plans to sell $200 million next year, with more due every quarter.

GTM Research says solar economics are due to keep improving. Scale, automation and other new technologies should drive Chinese panel prices down to 36 cents/watt by 2017, with the rate of savings accelerating through the period.

Costs aren't price, of course. The price of a panel is just 20% of an installation's costs when labor, permits, and inverters are added. But savings are accelerating in these areas as contracts become standardized, inverters are incorporated into panels and governments get used to issuing permits on all types of solar installations.

Imre Gyuk of the Department of Energy thinks that for each five watts of energy in the grid, we need one watt in storage, both to handle the intermittency of renewables and to reduce brownouts that cost the $250 billion electricity market $79 billion each year.

Thus, increased use of battery storage makes the grid more reliable. The Federal Energy Regulatory Commission is encouraging it with new economic incentives that put battery storage on regulatory par with other forms of standby grid power, such as natural gas plants, and make them eligible for fast track approval.

For utilities that don't want to cooperate with small solar installations, storage offers other uses for the electricity. SolarCity is selling Tesla(TSLA) battery packs that can store excess rooftop solar for use in electric cars. A start-up called Stem is leasing even larger battery systems to hotels that reduce their dependence on the grid.

Stanford has just announced self-healing battery electrodes and sulfer graphene-oxide batteries should soon start replacing lithium-ion, increasing the range of electric cars and providing another boost to storage economics.

The purpose of subsidies like the solar tax credit and government-subsidized research was always to create a renewable energy sector that could stand on its own and compete directly with fossil fuel energy based on costs.

That goal is being achieved. Solar costs are going to continue to come down while fossil fuel costs are expected to keep rising. With less need for subsidy, solar advocates are also better positioned to go after the fossil fuel industries' tax advantages.

Who would you rather be backing: an industry with rising costs and playing defense, or one that has lower costs and is playing offense?

At the time of publication the author had no position in any of the stocks mentioned.